Coffee market in Russia.

Past, present and future.

1. The coffee market at the time of the
1998 financial crisis
!  Coffee consumption in Russia:
"  1998 - 400 grams/capita.
1. The coffee market at the time of the
1998 financial crisis
!  Soluble coffee !  R&G coffee producers:
producers: "  Paulig;
"  Nescafe; "  Kraft Jacobs;
"  Kraft Jacobs; "  Kuppo;
"  Tchibo; "  Russkyi Product;
"  café Pele (by Cacique). "  Grand.
2. Growth in ten years, changes in
consumer tastes
!  1998-2003 – growth
by 10-12% a year.

!  2004-2009 - growth
by 4-6% a year.

!  Coffee consumption in
2009 – 900 grams
per capita.
2. Growth in ten years, changes in
consumer tastes
!  Promotion of coffee consumption.
!  Coffee became a basic-needs product.
!  Changes in lifestyle (leaded to opening of
hundreds of coffee shops).
!  Overall increase in consumer spending.
!  Soluble coffee consumers moved to
higher-quality freeze-dried coffee.
!  Growth of R&G share in overall coffee
consumption.
3. Investments in production and
opening new plants
!  Nestléand Kraft - first multinationals to
build manufacturing facilities in Russia.

!  Other multinationals with plants:

"  Tchibo;
"  Paulig (started construction of roasting facility);
"  Strauss Group.

!  Over $600,000,000 were spent by foreign

coffee companies on manufacturing
facilities in Russia.
4. Development of Russian roasters
!  1992– two small roasters started to roast
coffee in Russia:
"  Montana Coffee;
"  Blues Coffee.

!  2009- around 70 companies roast coffee

in Russia.
Roasters in Russia today
(producers of R&G coffee)
!  Large roasters (3000 tons and over a year):
"  Orimi Trade;
"  Strauss Group;
"  Product Service.
!  Medium size companies (from 500 to 3000 tons
per year):
"  Kuppo;
"  Moskovskaia Kofeynia na Paiakh;
"  Russky Produkt;
"  Renaissance.
!  Smaller companies (500 tons and under per
year):
"  Montana Coffee;
"  Safari Coffee.
!  Over 50 small roasters (10 to 100 tons a year).
5. Boom in café business and
peculiarities of its development
!  1998 - only one coffee shop and one
coffee cart operated in Russia.
!  Today - around 500–600 cafés and coffee
shops in Moscow alone, including:
"  local chains
!  Shokoladnitsa;
!  Coffee House;

!  Coffeein;

!  Cofemania;

!  Coffee Bean.

"  multinational chains:

!  Starbucks;
!  Costa Coffee;

!  and others.
5. Boom in café business and
peculiarities of its development
!  Quality of the product and service is still
relatively low.
!  General consumers perceive all R&G coffee as a
gourmet product but don’t demand quality.

!  Limiting factors of out-of-home coffee

consumption growth:
"  Promotion of small foreign brands as the best coffees in the
world, which developed a taste for certain kinds of coffee;
"  Lack of competition.

“People drink more coffee not because it is

cheaper, but because it is higher quality.”
Doctor Ernesto Illy
6. State of the market today (due to
economic realities)
!  115,000 tons is the total amount of
coffee consumed in Russia in 2009.

!  Soluble coffee market is now comparable

with traditional for Russia tea market.
!  In soluble coffee, the segments of powder
and spray-dried had declined, but the
freeze-dried segment grew.
!  R&G coffee is still considered to be a
gourmet product.
6. State of the market today (due to
economic realities)
!  Theimport of green coffee to Russia in
2009 was about 235,000 tons, which is
considerably higher than in 2008.

!  Split between Arabica and Robusta:

"  Equal in total import
"  Import of R&G coffee: 80% Arabica, 20%
Robusta.
6. State of the market today (due to
economic realities)
!  Largestimporters (about 97% of all green
coffee imports to Russia):
"  Nestlé;
"  Kraft Foods;
"  KLD Coffee Imports;
"  Orimi Trade;
"  Russky Product;
"  SFT Trading.
6. State of the market today (due to
economic realities)
The largest coffee origin countries for imports to Russia
7. Perceived trends in further market
development
!  Considerable consolidation of the market.

!  Difficult to see what will be the future of micro

roasters in Russia.

!  The increase in consumption for the next few

years will continue.
!  Out-of-home consumption will continue to
increase.
!  R&G coffee consumption will grow faster than
soluble coffee consumption, but overall balance
will not change in the next few years.
8. Pros and cons of investment in the
Russian coffee market
!  Coffee consumption per capita is still very small in
comparison to that of many other countries.
!  The market is still new and additional demand can and
will be created, either by you or someone else.
!  With a territory equal to 10% of the world’s dry land,
having 40% of the world’s natural resources, Russia
has huge potential for an increase in its population’s
buying power, which in turn could provide a demand
for a more Western lifestyle, where coffee
consumption is an integral part of everyday life.
!  The notion that coffee is bad for you is still a widely
held belief. If we, the coffee industry in Russia,
continue to dispel this myth, and when younger
people who know more about coffee become buyers
for their families, we might see another boom in
coffee consumption.
8. Pros and cons of investment in the
Russian coffee market
!  If you decide to do it — take it seriously.
Anything you want to do will require serious
resources in terms of expertise, time and money.
!  Don’t do anything before you select a partner
with local expertise and a good track record.
!  In selecting a local partner do not assume that
their success in business in Russia is the most
important asset for you. Look carefully at who
they are and what contributed to their success.
!  You have to be aware of the level of corruption
among Russian government officials and be ready
to deal with it.
That concludes my
presentation.
Thank you.